khalidi1_ EMMANUEL DUNANDAFP via Getty Images_palestine EMMANUEL DUNAND/AFP via Getty Images
en English

A Financial New Deal for Palestine

The COVID-19 economic shock and the recent conflict with Israel highlight the importance of boosting the Palestinian economy. For starters, the International Monetary Fund should acknowledge Palestine’s fiscal progress over the past quarter-century, and offer it a financial New Deal with upgraded status.

JERUSALEM – With the cease-fire ending the latest Israeli-Palestinian confrontations in Gaza and the West Bank, the question now is how to secure a credible path toward peace. To have any hope of success, Palestine’s economy will need to be strengthened, and concerned international parties will have to stay engaged. Fortunately, Palestinian economic management has achieved much more than the world has acknowledged, and is up to the task of reconstruction and development needed today.

A viable public-sector budget is one of the most enduring economic achievements of 25 years of Palestinian state-building efforts. But that success is now threatened by a chronic socioeconomic crisis, aggravated by the COVID-19 pandemic, prolonged political paralysis, and the recent upsurge in Israeli-Palestinian tensions. With US President Joe Biden’s administration apparently poised to take advantage of a new political balance emerging between the parties and in the region, multilateral financial institutions – and the International Monetary Fund in particular – must do their part to help Palestine.

Solid public finances have allowed the Palestinian National Authority to deliver the range of services needed to maintain public security, social cohesion, and a functioning, if hobbled, market economy amid a volatile macroeconomic and political climate under occupation. Despite limited policy space, the PNA’s sound fiscal governance has maintained aggregate demand and kept essential services running even during the pandemic and the resulting socioeconomic fallout, and the PNA budget still devotes around 30% of its expenditures to Gaza, despite not governing there.